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Sri Lankan opposition asks Sirisena to scuttle Hambantota port deal with Chinese company

On the SLPA’s valuation of the project at US$ 1.4 billion, the Joint Opposition wanted to know on what basis this figure was arrived at.

Published: 03rd January 2017 09:37 PM  |   Last Updated: 03rd January 2017 09:37 PM   |  A+A-

Express News Service

COLOMBO: Eight Members of the Sri Lankan parliament belonging to the Pro-Mahinda Rajapaksa Joint Opposition have written to President Maithripala Sirisena appealing to him to scuttle the Public Private Partnership (PPP) Framework Agreement signed between the government and the China Merchant Ports Holding Company on the management of the Hambantota port.

The MPs, led by Dinesh Gunawardena, pointed out loopholes, infirmities and mysteries in the agreement, which had replaced a more favourable one signed in September 2014 under the Rajapaksa Presidency.

Tracing the history of the agreements on the construction of the port, the MPs said that in September 2014, the Sri Lanka Ports Authority (SLPA), had entered into an agreement with the China Merchant Holdings (International) Company Ltd and the China Harbour Engineering Company Ltd, to lease the Hambantota Port (Phase II) on a Supply, Operate and Transfer (SOT) basis for 35 years. But this agreement was subsequently nullified and the China Harbour Engineering Company Ltd  and China Merchant Ports Holding Company Ltd, tendered separate proposals.

But the criteria for their selection were not defined. The China Harbour Engineering Company Ltd proposed an initial payment of approximately US$ 730 million for a 50-year lease period, during which, a payment structure similar to a royalty was proposed, which made the value of this proposal US$ 1.5 billion.

This was reported as the option preferred by the SLPA, as it would have benefitted it and the country.

But the proposal selected was that of the China Merchant Ports Holding Company for a one-time payment of US$ 1.08 billion, and a 99 year lease, extendable for a further 99 years.

“The question arises as to why China Merchant Ports Holding Company was selected, and who selected it,” the Joint Opposition pointed out.

In the original proposed joint venture company, the SLPA suggested a share split, but this was subsequently changed by the government to 80% to China Merchant Ports Holding Company Ltd and 20% to the SLPA.

“The question arises as to how, why and on what basis, all these critical calculations and changes were made by the Government,” the MPs said.

On the SLPA’s valuation of the project at US$ 1.4 billion, the Joint Opposition wanted to know on what basis this figure was arrived at.

“As far as we know, no proper valuation of the Hambantota Port’s facilities, infrastructure and land (including the 110 acre island) was done. Only construction costs had been taken into consideration. So, the agreement is based on an undervaluation of the assets,” the MPs contended. “The Government of Sri Lanka has agreed to be responsible for the debts of the SLPA. Therefore, the joint venture will not be responsible in the event the project goes bankrupt. The government of Sri Lanka will have to pay the debts,” the MPs pointed out. According to them , the Attorney General had opined that Articles 4, 5, 8 and 16 of the agreement are beyond the scope and/or the statutory powers vested with the SLPA.

The MPs charged that the Cabinet Appointed Negotiating Committee (CANC) was not given sufficient time to examine the case, and laid down procedures were not followed. Further, the grant of 15,000 acres adjacent to the Hambantota Port, depriving farmers of their land, has no justification, the MPs said.

The China Merchant Ports Holding Company Ltd has agreed to invest US$ 1.12 billion in the joint venture project, paying US$ 5 million as a security deposit, 10% of the investment value, including the security deposit, within one month; 30% of the investment value within 3 months and 60% of the investment value within 6 months.

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